With the growing adoption of advanced electronic devices worldwide, the demand for electronic design automation (EDA) software has increased greatly because it facilitates precision in integrated circuit (IC) designs. According to a report by Million Insights, the global EDA software market size is expected to hit $14.54 billion by 2025, growing at an 8.9% CAGR.
EDA software solutions are used in various electronic devices, including smartphones, smart watches and tablets. Also, major breakthroughs in cloud computing, Internet of Things (IoT) technologies and artificial intelligence (AI) should further increase the demand for EDA software.
So, with that, we think it wise to bet now on established EDA companies Synopsys, Inc. (SNPS), Cadence Design Systems, Inc. (CDNS), and Keysight Technologies, Inc. (KEYS).
Click here to check out our Software Industry Report for 2021
Synopsys, Inc. (SNPS)
SNPS provides electronic design automation software products that are used to design and test integrated circuits (ICs). Its offerings include Fusion Design Platform, which is a digital design implementation solution, Verification Continuum Platform, and FPGA design products that are programmed to perform specific functions.
On May 4, the company completed an acquisition of MorethanIP. This acquisition expands SNPS’ DesignWare Ethernet Controller IP portfolio with the addition of MAC and PCS for 200G/400G and 800G Ethernet. This delivers to customers a complete low-latency, high-performance Ethernet IP solution for networking, artificial intelligence (AI), and cloud computing SoCs.
On March 17, SNPS launched the industry’s first complete IP solution for PCI Express 6.0 that includes controller, PHY and verification IP and early development of PCIe 6.0 system-on-chip (SoC) designs. The product line is expected to increase the company’s sales.
SNPS’ revenue increased 16.3% year-over-year to $970.30 million for its fiscal year 2021 first quarter, ended January 31 Its revenue from its IP & System Integration segment increased 8.9% year-over-year to $536.20 million. Its non-GAAP net income increased 52.8% year-over-year to $239.47 million, and its non-GAAP EPS grew 50.5% year-over-year to $1.52.
For the quarter ended April 30, analysts expect SNPS’ EPS and revenue to increase 24.6% and 18.2%, respectively, year-over-year to $1.52 and $988.70 million. The company surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 56.9% over the past year and closed yesterday’s trading session at $237.07.
SNPS’ POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to a Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Growth and Quality. Within the B-rated Technology – Hardware industry, SNPS is ranked #8 of 48 stocks.
To see the additional POWR Ratings for SNPS (Momentum, Stability, Value and Sentiment), click here.
Cadence Design Systems, Inc. (CDNS)
CDNS provides software, hardware, and reusable integrated circuit (IC) design blocks worldwide. The company offers functional verification services that include emulation and prototyping hardware. Its functional verification offering consists of JasperGold, Xcelium, Palladium, and Protium.
CDNS acquired Pointwise, Inc. in April 2021. It is a leader in mesh generation for computational fluid dynamics (CFD). The addition of Pointwise’s technologies, which complement the recently acquired NUMECA’s CFD technology, is expected to significantly expand CDNS’ CFD and electromechanical analysis solutions, customer base and engineering talent. It completed the acquisition of NUMECA International on February 24.
For its fiscal year 2021 first quarter, ended April 3, 2021, the company’s revenue came in at $736 million, which represents a 19.1% year-over-year increase. Its non-GAAP net income increased 39.2% year-over-year to $231 million. Also, its non-GAAP EPS increased 38.3% year-over-year to $0.83.
Analysts expect CDNS’ EPS to increase 15.2% year-over-year to $0.76 for the current quarter, ending June 30. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Its revenue is expected to increase 12.6% year-over-year to $718.89 million in the current quarter. The stock has gained 62.7% over the past year and closed yesterday’s trading session at $126.35.
It’s no surprise that CDNS has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality, and a B grade for Sentiment.
Click here to see CDNS’s ratings for Growth, Value, Momentum and Stability as well. CDNS is ranked #19 of 122 stocks in the Software – Application industry.
Click here to check out our Software Industry Report for 2021
Keysight Technologies, Inc. (KEYS)
KEYS provides electronic design and test solutions to the commercial communications, networking, aerospace, defense and government, automotive, energy, semiconductor, electronic, and education industries. It operates mainly through two segments, its Communications Solutions Group and its Electronic Industrial Solutions Group. Its offerings include radio frequency and microwave test instruments, and software applications design tools.
On May 3, KeyBanc Capital Markets (KBCM), the corporate and investment banking arm of KEYS, announced the expansion of its Utilities, Power & Renewables Group through the addition of a six-person renewable energy investment banking team. The new team is expected to allow KEYS to continue to provide superior client service to the U.S. power sector.
KEYS acquired AQN Strategies LLC in March. It is an analytics-driven consultancy with deep expertise in the financial services industry. The acquisition aligns with KEYS’ relationship strategy and underscores the bank’s ongoing commitment to employ data-driven approaches that enable a simultaneous expansion of customer reach while maintaining a rigorous focus on risk discipline.
The company’s orders grew 7% year-over-year to $1.22 billion for its fiscal year 2021 first quarter, ending January 31 Its revenue increased 8% year-over-year to $1.18 billion in the quarter. Its net income grew 5% year-over-year to $172 million. And its non-GAAP EPS came in at $1.43, up 13.5% year-over-year.
For the quarter ended April 30, analysts expect KEY’s EPS to come in at $1.33, which represents a 70.5% year-over-year increase. The company’s revenue is expected to increase 14.6% year-over-year to $4.84 billion in its fiscal year 2021. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained more than 50% over the past year and closed yesterday’s trading session at $140.32.
KEYS’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has an A grade for Quality, and a B grade for Growth, Stability and Momentum.
We have also graded KEYS for Sentiment and Value. Click here to access all of KEYS’ ratings. KEYS is ranked #10 of 44 stocks in the B-rated Technology – Electronics industry.
SNPS shares were trading at $239.45 per share on Wednesday afternoon, up $2.38 (+1.00%). Year-to-date, SNPS has declined -7.63%, versus a 11.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More…
